No on Prop 5: Property tax break goes too far
Imagine a pollster asking you about a ballot initiative that would drain $1 billion from local government coffers, most of it earmarked for public schools.
And what if the initiative’s sponsors stood to profit from its approval?
That, in a nutshell, is Proposition 5 on the Nov. 6 ballot.
The initiative, written by the California Association of Realtors, would allow homeowners 55 and older to buy more expensive homes without paying any more in property taxes.
That would be a good deal for empty-nesters looking who are looking for more expensive homes. It also would be a good deal for real estate agents who collect commissions on those sales.
And, as the sponsors claim, it might put make some larger homes available to younger families in need of space.
If true, that’s one redeeming aspect of Proposition 5.
But this new tax break wouldn’t reduce the high cost of housing in California. Moreover, it would come at a steep cost to cities, counties and, especially, the schools those younger families count on to educate their children.
It also would turn Proposition 13 on its head.
The 1978 initiative fixed property taxes at 1 percent of assessed value — typically the sale price of a home — with a maximum increase of 2 percent annually. When a home is sold, the tax is reset, based on what the new owner paid.
By tying property taxes to sale price rather than market value, Proposition 13 provides stability and predictability for owners. It also creates large disparities in tax liability for similar properties based on how recently they sold.
Proposition 5 would create a new set of disparities — without a compelling reason.
Voters already have created an avenue for people over 55 who want to downsize. Under Proposition 60, passed in 1986, they can make a one-time transfer of the tax value of their home to a different house in the same county, so long as its market value isn’t higher than the house they sold.
The same break is available for homeowners with disabilities and anyone whose home is destroyed in a natural disaster.
In 11 counties, the property tax break is available to people who sold homes in other counties.
Proposition 5, however, would erase all restrictions. It would allow homeowners 55 and over to transfer their lower tax value as many times as they want, regardless of the price of their new home and regardless of where in the state they move.
Sure, everybody likes to save a buck. But the financial implications of creating this special property tax break are immense.
The state’s nonpartisan legislative analyst says public schools and local governments would suffer an immediate $100 million revenue hit, growing to $1 billion a year. That means fewer services or, more likely, ballot measures asking everyone else to pay higher taxes to make up for the lost revenue.
There is a public value in ensuring that homes are available for families. That was the main selling point for Proposition 60. The legislative analyst says about 85,000 homeowners older than 55 move to new houses each year. More might be better, but solving California’s housing crisis requires more housing, not special treatment for a small slice of the population that already qualifies for a tax break on home sales — and frequently is exempted from paying school parcel taxes.
The Press Democrat recommends a no vote on Proposition 5.
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